NIBA Journal

Insights, analysis, and updates from the National Introducing Brokers Association

March 30, 2012

Global Trading

As an IB, you may well have clients outside the US. In these cases, the need for non-US price data and currency conversions, time differences, language issues and more can arise. While the language issues may be difficult, and time differences inconvenient, software tools can help in other areas. As an example, a customer may wish to monitor their US futures position P&L in their own currency. A real time feed into a spreadsheet of both the futures price, say a near month gold contract, and a forward currency quote from a software package would work for this. As an example, using DTN ProphetX, we set up the quotes below: The Euro quote is in USD per Euro, and the 3 month forward quotes the number of pips to add to the spot price. The real time data in these quote cells can be linked directly to a spreadsheet, with...

Use and Investment of Customer Funds by Financial Institutions

1. Introduction Regulation 1.25, promulgated by the United States Commodity Futures Trading Commission (“CFTC”), sets forth the types of products and instruments in which futures commission merchants (“FCMs”) and derivatives clearing organizations (“DCOs”) may invest customer funds held in segregated accounts (“Permissible Investments”).[1] Related regulations pertaining to “secured funds” (CFTC regulation 30.7), “cleared swap customer collateral funds–FCMs” (CFTC regulation 22.2), and “cleared swap customer collateral funds–DCOs” (CFTC regulation 22.3) require that investment of those categories of customer funds comply with CFTC regulation 1.25. Most recently, the CFTC amended the scope of Permissible Investments in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and (in part) in response to the issues associated with the bankruptcy of MF Global.[2] In addition to dealing with Permissible Investments, the CFTC recently established regulations applicable to cleared swaps, which also cover the protection of customer collateral for cleared swaps and...

By NIBARead article

Focus on the Membership

March 23, 2012

3 min read

Rice Dairy | Focus on the Membership - March 2012

How did you get started? How did the firm get started? Brian Rice and Pete Turk, the owners of Rice Dairy LLC have a combined 45 years of experience in the futures industry and a combined 33 years being NFA registered. Brain started the company in 2002 with a vision in providing strong price risk management services in the dairy futures industry. With his focus on the floor, Brian created a streamlined execution venue for his customer base that was successful in building the company in the early days. Brian wanted to continue growing his company and expand his product offerings in other areas so in 2005 he partnered up with Pete; the two of them have taken the company to the next level as they converted their small boutique IB with a niche in floor execution to having 16 employees and a branch office in Pennsylvania that services all...

Summary of Last Ten Year Trends in FCM/Listed Derivatives Industry

Overview of the Last Ten Years of Segregated Funds Data for US FCM’s: Source: CFTC, in Billion USD. 10 Year Evolution of Segregated Funds: As illustrated above, 2011 & 2009 are the only two years in the last 10 that the US segregated funds decreased, as published by the CFTC. The percentage decrease in 2011 was 4% and in 2009 the decrease was 15%. The total segregated funds at the end of December 2008, 2009, 2010 & 2011 were 158, 134, 151 & 145 billion respectively. Over the ten year period from 2002-2011 the customer segregated funds for US markets grew at a compounded annual growth rate (CAGR) of 12%. If one were to only look at the December 31st figures it could be accurately assumed that the industry has not yet recovered from the financial crisis of 2008 in terms of segregated funds. However, in February and July 2011,...

MF Global Customers Face Tax Reporting Issues

Commodity customers of failed futures broker MF Global, Inc., face several tax issues relating to the broker's liquidation.  First, the customers must determine what tax items relating to their MF Global accounts to include in the preparation of their 2011 tax returns.  Second, the customers may need to decide when and whether they can deduct a loss for any amounts not recovered. Normally, commodity customers of an FCM receive from the FCM Forms 1099-B (which generally report trading gains and losses) and 1099-INT (which report interest income) that indicate what items the customers should include in their tax reporting.  The SIPC trustee administering MF Global's liquidation currently indicates on the trustee's website that he has requested an extension of the deadline for filing and mailing Forms 1099 to mid-March.  Notably, the trustee faces challenges in preparing the Forms 1099-B.  For customers that traded on foreign exchanges, the trustee must calculate...

Senate Letter to IRS - Tax Guidance for MF Global Customers

The Honorable Douglas H. Shulman Commissioner of Internal Revenue Internal Revenue Service 1111 Constitution Avenue, NW Washington, DC 20224 February 27, 2012 Dear Commissioner Shulman We are writing on behalf of the former customers of MF Global, Inc, On October 3 1,20 II , the firm filed for bankruptcy after revealing that hundreds of millions of dollars in customer money had gone missing, With tax deadlines fa st approaching, and with so much uncertainty still remaining over the fate of that money, we ask your agency to issue immediate guidance to MF Global's customers and to be flexibl e with those customers who may need to file their taxes with incomplete information. Former MF Global customers are still waiting for 1099 forms detailing gains and losses to their accounts in 20 I I . The court-appointed trustee applied for and received two ex tensions from your agency, but the former...

Straits Financial Hires Carol Dannenhauer and Forms LW Managed Accounts Division

Straits Financial LLC, a member and brokerage arm of the CWT Group, today announced it has hired Ms. Carol Dannenhauer as Executive Vice President and Head of its newly formed LW Managed Accounts Division. Straits is a registered FCM and a clearing member firm with the CME, CBOT, NYMEX and COMEX. “Carol joining Straits is a dream come true” said Joseph Mazurek, President of Straits Financial LLC. “Carol knows managed futures and she is a trusted name in the industry having served under the Lind-Waldock banner most of her career. She and Straits share much in common so this is a natural partnership focusing on providing quality customer service. Straits does not proprietary trade; our focus is 100% on clients and the protection of their assets.” This expands our product offering and notwithstanding where your Lind-Waldock account was transferred to, you the customer can Come Home Again” adds Paul Fry,...

CFTC Held Open Meeting to Consider One Final Rule and One Proposed Rule

Washington, DC – The Commodity Futures Trading Commission (CFTC) held a public meeting on Thursday, February 23, 2012, at 9:30 a.m. For more details and a link to watch a live webcast of the meeting, please visit: http://www.cftc.gov/PressRoom/PressReleases/pr6184-12

NFA Annual Meeting Review

Dear Members: I attended the NFA Annual Meeting today. As usual, there were more NFA employees than NFA members attending. The meeting lasted about 30-minutes and was very focused on issues surrounding the MF Global failure and crisis. Dan Roth, NFA President listed NFA actions by breaking them into three categories: 1. Things that the NFA might be able to do differently in co-operation with other SROs. 2. Things that the NFA can do differently by changing their own rules. 3. Things that are outside the authority of the NFA, but might be done differently if the industry makes the need for change clear. Several things that are being discussed with the committee of SROs sound like good ideas, and might not be so difficult to accomplish: (i) requiring seg investment detail reports to be filed more often and perhaps even displayed on NFA's website; (ii) performing more frequent spot...

NIBA Summer Meeting - Kansas City Board of Trade

The NIBA Summer Meeting is scheduled for the afternoon of June 21, 2012 at the Kansas City Board of Trade. In addition to a legal update, this meeting will focus primarily on agriculture issues important to our members. Details to follow soon.

By NIBARead article

Page 98